'Zim govt lacks capacity to fix economy'

Published: 07 June 2015

Government created the economic mess currently being experienced in the country and is lacking capacity to turn around the country's economic fortunes, an economist has said.

Brains Muchemwa, a renowned economist told delegates at the Mandel/GIBS 2015 economic outlook symposium held last week that government lacked capacity and will power to implement necessary reforms in order to create a conducive economic environment for business to flourish.

"We have got a government that has no capacity to stimulate economic activities. It is very difficult to run government in a stable environment were you can't print money. It is very difficult to influence real economic activity especially from a monetary policy perspective as well as the fiscal perspective ," he said.

Muchemwa added that economic growth prospects will continuously shrink and be overburdened by the constrained fiscal space.

"(Economic) growth is going to remain very constrained. It speaks a lot about how to manage our expectations as we run our companies and even how we strategise."

He added: "Government's revenue has been growing but at a decreasing rate, which is very worrisome. In fact what is worrisome is that revenue growth is decreasing at a very fast rate. The economy is going to shrink and it might actually shrink worse than this."

Zimbabwe is battling to curb an intensifying liquidity crisis at a time when quantitative easing has of late become the fashionable policy intervention mechanism in the developed world to jump-start growth and stop companies from collapsing.

This comes as government has been urged by various multi-lateral institutions to implement austerity measures aimed at reviving the country's ailing economy characterised by a sustained drain on the fiscus due to a bloated civil service wage bill, erratic power supplies, liquidity constraints, depressed industrial capacity among others which continue unabated.

"One of the most important issues that need to be addressed is the civil service reform and the creation of fiscal space. When government can't print money it becomes very difficult to actually influence the economy unless if they create sufficient and able fiscal space. I don't foresee the government having the energy to chase up with reforms in 2015," said Muchemwa.

He noted that the economic growth's downward trend might be worse than what has been projected by the policy makers.

"I don't believe we have hit rock bottom in terms of the downward trend for one reason. Most of our big corporates which are collapsing are being (gradually) replaced by small to medium enterprises (SMEs)."

"It's the process of creative destruction, so it's a cycle. SMEs take much longer to fill the void left by big companies and the downturn might take a bit longer than expected," he said.

This comes as the 2015 National Budget funding is under threat as the out turn is expected to be $3,55 billion against Finance minister Patrick Chinamasa announcement of $4,1 billion.

Finance ministry secretary Willard Manungo recently revealed the downward revisions which were made in line with IMF's Staff Monitored Programme.

Government is currently running on a cash budget after failing to secure external support, but tax income is dwindling on the back of waning economic activity.

According to the World Bank, Zimbabwe's GDP growth declined to 1,7 percent last year from 2013's 3,2 percent.
- dailynews